WASHINGTON – The U.S. Supreme Court could be poised to deal a blow to so-called "forum shopping" and a stronger hand to companies and others defending themselves against would-be whistleblowers accusing them of defrauding the government.
Sara N. Gerber, an attorney with the firm of BlankRome in Washington, D.C., whose practice involves government litigation and contracts, said a pending Supreme Court decision could end ambiguity in such cases, "provide uniformity ... and give defendants a greater degree of predictability about whether False Claims Act (FCA) cases brought against them" have been brought in a timely fashion.
Called the Lincoln Law because it was originally passed during the Civil War in 1863, the FCA is a federal law that imposes penalties on people and companies who defraud government programs. The FCA allows individuals to bring lawsuits, ostensibly on behalf of the government, and to claim a share of whatever the government might collect from the action.
The FCA has two statute of limitations provisions. The first requires someone bringing a FCA action, known as a relator, to bring the action within six years after the date an alleged fraud against the government occurred. A subsection added in 1986 states a court action may be brought three years after the date when the facts are known or should have been known by government officials with the responsibility to respond, but no more than 10 years after the alleged fraud.
Gerber said the case before the Supreme Court, docketed as U.S. ex rel. Hunt v Cochise Consultancy Inc., centers on the question of whether a fraud relator can rely on the subsection 3731(b)(2) in cases in which the government decides not to intervene and is not directly involved in the case.
“Some circuit courts give the relator the benefit of this statute of limitations while others do not,” she said. “The Supreme Court will now resolve the issue. It will decide whether Subsection 3731(b)(2) is applicable at all in non-intervened cases, and if so, whether the limitations period should be triggered by the government’s knowledge of the fraud, or the relator’s.”
In Hunt v. Cochise, the relator filed a claim more than six years after the alleged fraud occurred, but within three years of disclosure of the fraud to agents of the FBI. The FBI had interviewed the relator about his role in a separate kickback scheme.
Gerber said the U.S. 11th Circuit Court of Appeals "held the relator’s claims were not time barred under Subsection 3731 (b)(2) and that it was the government’s knowledge, not the relator’s as some circuits have held, that triggered the running time of the limitations period,” Gerber said.
Uniformity in how the subsection would be applied to all FCA cases, even those in which the government does not intervene, has the potential to expand the time a whistleblower has to bring claims against a defendant, Gerber said. The section authorizes a lawsuit up to 10 years after fraud as long as the complaint is filed within three years of when the government knew or should have known of the fraud.
“This would seem to encourage realtors to delay filing a suit and is contrary to the purpose of the FCA to combat fraud quickly and efficiently,” Gerber said.
Circuit courts are split on whether the subsection should be applied in cases in which the government does not intervene, which Gerber said is the majority of the time. As a result, currently the question of whether an FCA lawsuit has been filed before the expiration of a statute of limitations can depend on where the case is filed - a factor that encourages "forum shopping," or the act of filing a lawsuit in a court in which the plaintiffs believe their lawsuit may receive a warmer reception than others, even if the alleged fraud occurred in a different jurisdiction.